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Eighth Report from the Commision on the Implementation of the Telecommunications Regulatory Package

Following liberalisation in 1998, competition in European telecommunications markets has driven growth and innovation and the widespread availability of services to the public. Between 1999 and 2001 the value of telecoms services in Europe rose 24% from € 182 billion in 1999 to € 225 billion in 2001. The mobile sector alone grew by 32% in 2000 and 21% in 2001 in terms of revenue, while the average mobile penetration rate in Europe is now 75%, from 70% in 2001 1 . At the same time consumers have a wider choice of operators, with new entrants driving prices downwards. Incumbents’ tariffs for national calls have been reduced by around 50% on average since liberalisation, and those for international calls by around 40%. New entrants in many Member States now offer discounts over incumbent prices even for local calls.

Revenue indicators are still positive. Realistic estimates of growth in the telecoms services market for 2002 in the combined national markets of the 15 Member States vary from around 5%2 to 7%3 ; a very healthy outlook in the light of average projected EU GDP growth of 1.0%4 for 2002.

However, the market is somewhat fragile following the bursting of the dotcom bubble, the global economic slowdown and over-investment in backbone capacity, combined with high levels of debt resulting from expensive acquisition strategies and the cost of the transition to third generation mobile systems.. There is therefore clearly a concern that adverse conditions in capital markets will reinforce market consolidation following liberalisation, possibly driving entrants from the electronic communications market.

The Parliament and Council adopted in March 2002 the new package of sector specific regulation designed for more competitive markets and converging electronic communications technologies. The new framework links the imposition of regulatory obligations to the absence of effective competition. The new regulatory environment will enable regulators to focus their powers to promote competition, protect the citizen and consolidate the single market, while taking account of the need for innovation and the long-term sustainability of the sector.

The Commission now regards it as a priorit y to encourage a timely transit ion to the new framework. In addition to providing the legal predictability and regulatory flexibility necessary for continued investment in the sector, this will complement the eEurope objective of achieving competitive local access for internet services over broadband networks as cheaply as possible on a sustainable basis.

National regulatory authorities (NRAs) will clearly play a major role in the new regulatory regime, together with the national competition authorities. They will also have an important role under the new regime in helping to ensure that rules are applied consistently in all Member States, in cooperation between themselves and with the Commission. NRAs will in particular have to assess the degree of effective competition in relevant markets, and decide the regulatory obligations to be imposed on players with significant market power. Current regulation, together with the rules of competition law, will clearly apply until that assessment has been made. The Commission believes as a general principle that a successful transition to the new framework depends on the full implementation of the current framework, including universal service and consumer protection measures.

This report, therefore,
– provides a balance sheet of market development after four and a half years of liberalisation, and
– examines the current status of the main regulatory obligations forming the basis for the transition to the new regulatory environment, with indicators of best practice where appropriate.

The report also gives a brief assessment of the state of preparation by Member States for the transposition of the new regulation into national law. More detailed market and regulatory data, including an assessment of the implementation of the UMTS Decision, are contained in the annexes, which are in the form of a Commission Staff Working Paper.

Eighth Report from the Commision on the Implementation of the Telecommunications Regulatory Package

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